The Top Stocks To Buy On A Crash

Summary

• Growing volatility creates opportunities in the best stocks and sectors.
• Healthcare and technology remain top sectors to buy.
• Here are the best stocks to buy in every industry.
• Looking for more stock ideas like this one? Get them exclusively at Top Stocks For Tomorrow. Get started today »

Last week, I wrote how risk of a 5% pullback was rising, and this week, uncertainty remains high enough to suggest selling rallies in sectors with demand headwinds so that cash can be used to buy better businesses where demand tailwinds are strongest.

My caution stemmed from a surge in our overbought indicator, which gauges optimism and fear by calculating the percentage of institutional-quality stocks in our universe trading 5% or more above the 200-day moving average (DMA). In January, 55% of our universe was 5% or more above its 200 DMA, prompting us to warn of weakness, and then, a 2% reading in March alerted us to risk/reward significantly favoring buyers.

In discussing this indicator on May 22, I wrote,

"If we get above 30%, I'll begin recommending selling broken businesses, and if we get above 40%, then I'll start recommending selling rallies to reduce margin exposure."

That's what's happened. Last week's reading near 30% was the first neutral risk/reward reading since March, and earlier this week, we told members a reading near 40% meant it was time to play defense.

Source: Top Stocks for Tomorrow.

To be clear, readings can linger above 40%, but that doesn't mean we should be pressing bets by maxing out margin or buying stocks with impaired business models. Instead, upgrading portfolios with high-quality companies on down days makes the most sense.

And there should be plenty of volatility to allow you to proactively plan entries and exits. There's plenty of cash on the sidelines, supporting the notion investors will buy the best stocks on sale, but there's also plenty of question marks, suggesting caution is warranted. COVID-19 cases are climbing, global gross domestic product estimates are likely to be cut when the IMF meets on June 24, and permanent job loss tied to the pandemic shutdown could still cause a spike in credit delinquencies and defaults.

It also shouldn't be ignored that there's a seasonality headwind associated with the fast-approaching end of the second quarter. Following big gains, programmatic investors have little incentive to step up and take on risk in the final two weeks of June.

All of those risks could be offset by fiscal and monetary stimulus, though. The Federal Reserve appears to have no problem with leaving the credit spigot wide open, saying Wednesday it doesn't anticipate any rate increases until 2022. Similarly, the Treasury Department and members of Congress continue to float the idea of additional stimulus.

It also shouldn't be ignored that historically, odds favor the S&P 500 Index ETF (SPY) being higher thirty trading days following a down 3% day. Since 1999, the SPY has had 80 down 3% plus days. It's been higher 30 trading days later 62.5% of the time, returning an average and median 1.78% and 2.34%, respectively.

Source: Top Stocks For Tomorrow.

Overall, competing forces - easy credit versus dismal economic data - makes it important to focus on buying great businesses in the best sectors.

The top sectors to buy

Our system ranks major market sectors and industries weekly by market cap by aggregating individual stock scores for our members.

This scoring system is explained more here, but to put it simply, our ranking incorporates forward earnings growth expectations, historical trends in reporting earnings that beat Wall Street estimates, insider buying, short-term, and long-term institutional money flow, forward valuation relative to historical valuation, contra-trend short interest analysis, and quarterly seasonality over the past decade.

Grading stocks in this manner and then, scrutinizing scores by basket, allows us to see what market "ponds" are best for fishing.

Currently, the best large-cap sectors are healthcare, technology, and services. Consumer goods, services, and technology are top rated in mid-cap, while financials, technology, and healthcare offer upside in small-cap.

Energy remains notably weak across all market caps and except for small cap, financials are also worrisome. There will be a time when the risk reward associated with oil stocks and banks, including credit issuers, will improve, but until then, the groups are likely to expose you to nail-biting volatility. Given oil production and credit default uncertainty, it makes sense to focus on other stocks. However, if you need exposure to those sectors, then consider industries that are high-scoring within them. For example, the industry ranking we shared with members this week suggests financial data and natural gas plays offer upside within those groups.

Source: Top Stocks for Tomorrow

The top stocks to buy

Stocks follow earnings over time, insiders only buy for one reason; money flow reflects institutional optimism or pessimism, and seasonal patterns often rhyme, so high scoring stocks in our research offer investors a great source for new investment ideas.

This week, we shared over 100 stocks with members, including the following top-rated stocks within these select sectors.

Best Scoring				6/11/2020	4 WEEK MA
Company Name	Symbol	Sector	INDUSTRY	SCORE	SCORE
Basics
FMC Corporation	(FMC)	BASIC MATERIALS	AGRICULTURAL INPUTS	100	87.5
Eastman Chemical Company	(EMN)	BASIC MATERIALS	CHEMICALS	85	63.75
Albemarle Corporation	(ALB)	BASIC MATERIALS	SPECIALTY CHEMICALS	85	75
Ashland Global Holdings Inc.	(ASH)	BASIC MATERIALS	CHEMICALS- MAJOR DIVERSIFIED	85	61.25
The Sherwin-Williams Company	(SHW)	BASIC MATERIALS	SPECIALTY CHEMICALS	85	88.75
Ecolab Inc.	(ECL)	BASIC MATERIALS	SPECIALTY CHEMICALS	85	86.25
Consumer Goods
Polaris Inc.	(PII)	CONSUMER GOODS	RECREATIONAL VEHICLES	105	96.25
The Hain Celestial Group, Inc.	(HAIN)	CONSUMER GOODS	PACKAGED FOODS	105	106.25
Brown-Forman Corporation	(BF.B)	CONSUMER GOODS	BEVERAGES	95	81.25
Lear Corporation	(LEA)	CONSUMER GOODS	AUTO PARTS	95	73.75
Planet Fitness, Inc.	(PLNT)	CONSUMER GOODS	LEISURE	95	73.75
McCormick & Company, Incorporated	(MKC)	CONSUMER GOODS	PACKAGED FOODS	90	92.5
NIKE, Inc.	(NKE)	CONSUMER GOODS	FOOTWEAR & ACCESSORIES	90	81.25
Pool Corporation	(POOL)	CONSUMER GOODS	LEISURE	90	93.75
Herbalife Nutrition Ltd.	(HLF)	CONSUMER GOODS	PACKAGED FOODS	90	87.5
Energy
Cabot Oil & Gas Corporation	(COG)	ENERGY	OIL & GAS E&P	105	103.75
Delek Logistics Partners, LP	(DKL)	ENERGY	OIL & GAS MIDSTREAM	90	68.75
Cheniere Energy Partners, L.P.	(CQP)	ENERGY	OIL & GAS MIDSTREAM	85	63.75
EQT Corporation	(EQT)	ENERGY	OIL & GAS E&P	80	81.25
Financials
KKR & Co. Inc.	(KKR)	FINANCIALS	ASSET MANAGEMENT	100	75
Marsh & McLennan Companies, Inc.	(MMC)	FINANCIALS	INSURANCE BROKERS	100	80
Brown & Brown, Inc.	(BRO)	FINANCIALS	INSURANCE BROKERS	100	83.75
Visa Inc.	(V)	FINANCIALS	CREDIT SERVICES	100	87.5
PRA Group, Inc.	(PRAA)	FINANCIALS	CREDIT SERVICES	100	86.25
Lakeland Financial Corporation	(LKFN)	FINANCIALS	BANKS-REGIONAL	95	73.75
First Financial Bankshares, Inc.	(FFIN)	FINANCIALS	BANKS-REGIONAL	95	71.25
Intercontinental Exchange, Inc.	(ICE)	FINANCIALS	FINANCIAL DATA & STOCK EXCHANGES	95	85
Moody's Corporation	(MCO)	FINANCIALS	FINANCIAL DATA & STOCK EXCHANGES	95	93.75
Mastercard Incorporated	(MA)	FINANCIALS	CREDIT SERVICES	95	77.5
Healthcare
Acadia Healthcare Company, Inc.	(ACHC)	HEALTHCARE	SPECIALIZED HEALTH SERVICES	115	92.5
Medpace Holdings, Inc.	(MEDP)	HEALTHCARE	DIAGNOSTICS & RESEARCH	110	108.75
DaVita Inc.	(DVA)	HEALTHCARE	SPECIALIZED HEALTH SERVICES	105	88.75
Triple-S Management Corporation	(GTS)	HEALTHCARE	HEALTHCARE PLANS	105	91.25
Penumbra, Inc.	(PEN)	HEALTHCARE	MEDICAL DEVICES	105	83.75
AbbVie Inc.	(ABBV)	HEALTHCARE	DRUG MANUFACTURERS	100	100
Patterson Companies, Inc.	(PDCO)	HEALTHCARE	MEDICAL DISTRIBUTION	100	80
UnitedHealth Group Incorporated	(UNH)	HEALTHCARE	HEALTHCARE PLANS	100	92.5
McKesson Corporation	(MCK)	HEALTHCARE	MEDICAL DISTRIBUTION	100	87.5
The Ensign Group, Inc.	(ENSG)	HEALTHCARE	LONG-TERM CARE FACILITIES	100	80
Industrials
Exponent Inc.	(EXPO)	INDUSTRIALS	CONSULTING SERVICES	105	92.5
Old Dominion Freight Line, Inc.	(ODFL)	INDUSTRIALS	TRUCKING	105	103.75
Kratos Defense & Security Solutions, Inc.	(KTOS)	INDUSTRIALS	AEROSPACE & DEFENSE	105	90
Kadant Inc.	(KAI)	INDUSTRIALS	PAPER & PAPER PRODUCTS	100	87.5
Marten Transport, Ltd.	(MRTN)	INDUSTRIALS	TRUCKING	100	98.75
Dover Corporation	(DOV)	INDUSTRIALS	DIVERSIFIED MACHINERY	95	72.5
Waste Connections, Inc.	(WCN)	INDUSTRIALS	WASTE MANAGEMENT	95	75
SiteOne Landscape Supply	(SITE)	INDUSTRIALS	INDUSTRIAL DISTRIBUTION	95	93.75
Energizer Holdings, Inc.	(ENR)	INDUSTRIALS	ELECTRICAL EQUIPMENT & PARTS	90	70
CSX Corporation	(CSX)	INDUSTRIALS	RAILROADS	90	71.25
REITs
Safehold Inc.	(SAFE)	REITS	REIT-DIVERSIFIED	100	97.5
MGM Growth Properties LLC	(MGP)	REITS	REIT-DIVERSIFIED	95	72.5
American Tower Corporation (REIT)	(AMT)	REITS	REITS-SPECIALTY	95	87.5
CoStar Group, Inc.	(CSGP)	REITS	REAL ESTATE SERVICES	95	86.25
CyrusOne Inc.	(CONE)	REITS	REIT-SPECIALTY	90	92.5
Services
Churchill Downs	(CHDN)	SERVICES	GAMBLING	110	97.5
Medifast, Inc.	(MED)	SERVICES	PERSONAL SERVICES	105	91.25
Equifax Inc.	(EFX)	SERVICES	CONSULTING SERVICES	105	96.25
Strategic Education, Inc.	(STRA)	SERVICES	EDUCATION & TRAINING SERVICES	100	98.75
Stitch Fix Inc.	(SFIX)	SERVICES	SPECIALTY RETAIL	100	93.75
Ulta Beauty, Inc.	(ULTA)	SERVICES	SPECIALTY RETAIL	100	71.25
Dollar General Corporation	(DG)	SERVICES	DISCOUNT STORES	95	96.25
Casey's General Stores, Inc.	(CASY)	SERVICES	GROCERY STORES	95	76.25
TransUnion	(TRU)	SERVICES	CONSULTING SERVICES	95	83.75
Chegg, Inc.	(CHGG)	SERVICES	EDUCATION & TRAINING SERVICES	95	100
Technology
Alarm.com Holdings, Inc.	(ALRM)	TECHNOLOGY	SOFTWARE-APPLICATION	105	103.75
Zillow Group, Inc.	(Z)	TECHNOLOGY	INTERNET CONTENT & INFORMATION	105	103.75
Broadcom Inc.	(AVGO)	TECHNOLOGY	SEMICONDUCTOR- INTEGRATED CIRCUITS	100	81.25
CoreLogic, Inc.	(CLGX)	TECHNOLOGY	INFORMATION TECHNOLOGY SERVICES	100	100
Adobe Inc.	(ADBE)	TECHNOLOGY	SOFTWARE-INFRASTRUCTURE	100	100
Coupa Software Incorporated	(COUP)	TECHNOLOGY	SOFTWARE-APPLICATION	100	103.75
EverQuote	(EVER)	TECHNOLOGY	INTERNET CONTENT & INFORMATION	100	98.75
Guidewire Software, Inc.	(GWRE)	TECHNOLOGY	SOFTWARE-APPLICATION	100	78.75
New Relic, Inc.	(NEWR)	TECHNOLOGY	SOFTWARE-INFRASTRUCTURE	100	100
ServiceNow, Inc.	(NOW)	TECHNOLOGY	SOFTWARE-APPLICATION	100	97.5
Utilities
Dominion Energy, Inc.	(D)	UTILITIES	UTILITIES-DIVERSIFIED	105	96.25
Terraform Power	(TERP)	UTILITIES	UTILITIES-INDEPENDENT POWER PRODUCERS	105	96.25
NextEra Energy, Inc.	(NEE)	UTILITIES	UTILITIES-REGULATED ELECTRIC	95	83.75
NRG Energy, Inc.	(NRG)	UTILITIES	UTILITIES-INDEPENDENT POWER PRODUCERS	85	66.25

Click to enlarge

Analyst’s Disclosure: I am/we are long NOW, MA, NKE. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Comments

[Antiochus]

Why Everquote? It doesn’t have a large moat, it has a low P/S and high gross margin because its marketing spend is enormous. Consider market spend as Cost of Revenue and it looks much more in line with valuations of other cloud tech companies. Thing is, it doesn’t have the same moat as those other ones...

[Doggywag]

Although I'd quibble on a few of them, this is a good (but hardly exhaustive) list of good stocks. My experience with the volatility of the past few years is that buy-and-hold is the only way to go. Yes, get the best prices you can on the best stocks you can find. Then . . . never sell. This is esp. true of dividend-growth stocks. Treat your stocks like the house you live in.

[Limelight Alpha Management Partners]

Very well said!

[GameBuzz]

I like and appreciate the lists. But if you want to buy them on a “crash” (your word), you’ll need a TARDIS to take you back to March!
Best of continued success!

[LazyGringo]

My "safe" plays are the telcos VZ and T, CSCO, AAPL and VIAC though anything can go down, these are all solid investments at this price and. except for aapl pay large dividends for you to wait. I would also buy more of each on 5% dips. During that insane 1500 point rally I cleared $600,000 in cash to use in case of another test of the March lows, or anything close to it, In that case I would buy AAPL first and then maybe a few fliers like airlines for the longer term. One thing about medic al stocks is that people are now afraid to go to the hospital because of risk of being infected. They are putting off elective surgery and trying to get healthy plus many patients with conditions see doctors now via webcam, and many will let their insurance go if they go broke enough so beware the flipside of the get-well trade. Notice my stocks all have to do with internet use, which is the one thing that has really increased recently including T and VIAC as my cheap netflix trades. That is major league streaming video that is barely priced into the stocks.

[Sourdough98]

The "cash on the sidelines" expression annoys me. There is no cash in a market as leveraged as this one. This so-called cash will be used in margin calls and a rush to pay down real estate as it craters and other debt or face default. As for me, I'm waiting for the S&P to go below $1,500 to buy some rock solid blue chip dividend aristocrats like PG, PEP, MDT, JNJ, ADP, APD, WMT. Maybe I'll buy some RE at half off. Shouldn't be too long now. 2021?

[ripoll]

Please watch today: $ DOYU, $ WDAY and $ TAL.

[dumpsterdiva]

I will shorten this list
two stocks you should buy in a crash
vix/tvix CBOE Volatility
TLT iShares Barclays 20+ Yr Treas.Bond

Disclosure
Short Planet Fitness

[xjpc]

Some good companies in the list-- but too expensive. Any prices > Oct' 19 are a nono in the current environment imho.

[OE1980]

yuck.

[User 50088590]

Just let the markets crash again... then buy. Everything is high and a double top is being put in. Buyer beware...

[ripoll]

B "H
Taking advantage of the Sunday rest in Argentina, after having passed Shabbat properly in my home, with social distance by Covid 19; I have taken the trouble to analyze this HUGE and endless recommended list ..., the only interesting thing I found, from my experience and analysis are: ASH, FMC, V, ICE, MA, PEN, UNH, CHDN and NRG, the REST PUBLISHED has already made its journey ..., in addition, most of the companies recommended by the author, are of very low capitalization and volume.

[jtighe65]

Gee, thanks for narrowing it down

[EyeBelieve]

There's relative safety in healthcare, tech and utilities, but I'm not sure about your specific stock recommendations. Need more due diligence than a short article can provide!

[Newbie5009]

The higher the score the better the buy from capital appreciation perspective?

[johnsoriaknows]

As coronavirus seem to be entering a second wave (mentioned in this article), COVID-19 plays will take center stage again.

Trinity Biotech (NASDAQ:TRIB) has been inching up steadily desptite a helter skelter market because the company expects to get FDA clearance for its COVID-19 Elisa antibody tests which will be followed by its 12-minute padid autoimmune tests per CEO comments during the 1Q 2020 , May 27, 2020 conference call.

Ironically, oncology companies Cyclacel (CYCC), BiolineRx (BLRX), and Verastem (VSTM) are all working on an angle to use their oncology candidates in early stages of the disease with the goal of reducing lung damage that would minimize the need for inhalator use. All three companie are well-funded and have several oncology milestones for 2H 2020 and beyond - CYCC and BLRX have small floats with CYCC having less than 4M shares on the float.

Here is a discussion on TRIB, CYCC, BLRX, and VSTM, for those curious about them:

seekingalpha.com/...

You might want to check out Protalix (non-COVID stock) a few weeks from having the FDA approve the company's BLA filing about its Fabry drug candidate with a 90%+ probability of being approved. This would be the second FDA-approved for this company with strong balance sheet and othet important assets in 2nd Phase (Cystic Fibrosis and Ulcerative Colitis, and others in the pipeline).

Good luck!!

[Smreka]

ENG is The Top Stock To Buy On A Crash

1. ENG is profitable (Q1 2020).

2. May 7, 2020: CEO ENG William A. Coskey, P.E. said, "the company will continue to focus on building industry alliances and thus securing more of these targeted projects, most of which are estimated to have revenue value of between $10 to $250 million each." (May 7, 2020).

3. June 9, 2020: The CEO ENG said he expects to announce further news on the company's progress relating to modular project proposals "in the near future." Targeted projects ENG are estimated to have revenue value of between $10 to $250 million each.

[Wilbodave]

Thanks for posting. I went to the link and reviewed the scoring systems methodology, but I'm still left with a question. I know that not all the stocks that make your list pay a dividend, but does you screen exclude corporations with a recent dividend cut or suspension? Part of why I'm asking is CSGP is listed as a REIT, but does not actually appear to be and does not pay a dividend.

[Deja Vu]

The minute you recommended Herbalife, this article lost all credibility....

[Darren McCammon]

There are firms which are going to do well regardless of whether we go into COVID shutdown 2.0 or not, namely those which process and move natural gas from here to there:
Natural Gas Provides A Place To Ride Out The Storm: Williams And MPLX
seekingalpha.com/...

[Limelight Alpha Management Partners]

I agree that there is a supply argument supporting natural gas prices, but I do wonder if declining associated gas production and economic weakness will negatively impact pipeline volume. Currently, MPLX is neutral rated and WMB is high-neutral rated in our scoring system. It will be interesting to see what happens from here.

[TrustButVerify2]

Not familiar with Williams are they an MLP? The one thing thats kept me away from Natural Gas pipelines is it seems theyre about all MLPs except Kinder-Morgan and the extra tax complexity is not something I'd be super eager to get into

[Frank Investor]

Wayyyyy....... not enough info here to say all these are good buys.

[Limelight Alpha Management Partners]

Thanks for reading and commenting. Our research is designed to be an idea generation machine. It's a great starting point for ideas, but every investor needs to to their due diligence. These stocks have characteristics that can lead to excess, but that doesn't mean that every stock is right for every individual's situation.

[cccraig20]

Agreed

[MortyLong]

Honesty how refreshing please refine w/top 5 & reasons please otherwise just JUST list $AMZN W/no reasons to buy just a list w/no value add. Please don’t publish & waste our time. This is where people decide to add/follow or list you as so many w/no reason to ever look back at you again, take every communication as equally useless & I know that’s harsh but you get 2 more chances to be of use to the SA community. I can make a list, my recommendation is $PPD as BUY for months w/PT $35, add WDAY PT $175. WORK PT $20 Healthcare: BMY, NVTA 
BCRX $4.50 hold for HAE primary BUY opportunity hold for as long as possible, BMY buy on dips below $60 will soar off of CELG pipeline & nice yield hold will hit & $85+ Biggest regret let outside noise break my resolve sold 450 shares st nice price & profit from $22.90/pps to $55, 4 calls bought all deep ITM $50, $52.50, $51, $52.50 hit $82.50 listened to the “noise” ignored my gut had COVID19. Made nice $ but not goal to sell Israel buying MRNA COVID-19 vaccine trust YOUR gut or someone whose consistent. BUYS $PPD PT $35, will add any questions send my way will try to help you. Limit losses built on strict stops strong buys: $AVEO $7$7.50 bd patient BCRX below $5, RIOT cost basis $.90 hold for “halvening period” read about blockchain & hold RIOT good pick. CBAY $6 or less, $BEAT will update ASAP.
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